UPDATE 3-Mexico says deal to repeal U.S. steel tariffs could be close

Published Tue, May 14 2019 8:21 PM EDT

Allison Martell

(Recasts with minister seeing deal on steel tariffs close)

TORONTO, May 14 (Reuters) - Mexico is closing in on a deal to repeal U.S. President Donald Trump's punitive tariffs on steel and aluminum, a senior Mexican official said on Tuesday, potentially moving a step nearer to the ratification of a major trade deal struck last year.

"We are, I think, close to negotiating the lifting of the tariffs," Mexican Economy Minister Graciela Marquez told Canadian broadcaster CBC after meeting with Canadian Foreign Minister Chrystia Freeland in Toronto.

"We're having very fruitful conversations on lifting the tariffs not only in the U.S. but also here in Toronto."

Adam Austen, a spokesman for Freeland, said the minister noted on Tuesday that it was unwise to predict how long a negotiation would take. He declined to comment further.

Mexico and Canada imposed tariffs on various U.S. products last year in response to Trump's metals duties. The Mexican government says it could soon swap out some goods from its list for others to spread the pain across the U.S. economy.

Earlier, Marquez said a new target list of U.S. products had been completed, and only needed approval from other officials, including President Andres Manuel Lopez Obrador. That process would likely take at least two to three weeks, she said.

Her remarks, and those of a business leader involved in efforts to lift the tariffs and secure passage of the United States-Mexico-Canada Agreement (USMCA), suggested there may be scope to resolve the spat before fresh tariffs are imposed.

Mexico's push to have the metals tariffs lifted has become bound up with its efforts to secure U.S. ratification of USCMA, which was signed by the three countries' leaders on Nov. 30 to replace the 25-year-old North American Free Trade Agreement.

Mexicans lobbying for USMCA approval have focused their attention more on Democratic lawmakers since Democrats took control of the U.S. House of Representatives in January.

Speaking on condition of anonymity, a Mexican official said any revised retaliatory tariffs would lean more than before toward Democrats' districts to impress on them the need to lift the metals duties, and pave the way for USMCA ratification.

When asked in a news conference if Mexico would target Democratic constituencies to encourage more U.S. lawmakers to argue for an end to the metals duties, Marquez said the new measures included economic and political components.

Democrats have said they will not ratify USMCA unless Mexico delivers on a pledge to enact stronger labor provisions. Mexico's Congress passed a law that strengthens the rights of trade unions near the end of last month.

U.S. Republican lawmakers have already signaled that Trump will need to drop his metals tariffs to pass USMCA.

U.S. Republican Chuck Grassley, who chairs the Senate Finance Committee, said last month there was no chance of ratifying the new trade pact until the tariffs were gone.

Participants in the process see progress.

Moises Kalach, a leader of the CCE business lobby, which represented Mexico's private sector in the USMCA talks, told Reuters the original retaliatory tariffs were having the desired effect and saw no need to apply a new round of measures yet.

"You don't want to ... make a major change to retaliatory tariffs only to end up reaching a deal a couple of weeks later," he said, adding he saw signs of "light" in breaking the impasse.

Canada's Freeland said she would hold talks in Washington on Wednesday with U.S. Trade Representative Robert Lighthizer, as well as Grassley.